Yellen's four-year term as chair will end on February 3. The only other potential choice for Fed chair Trump has mentioned is Gary Cohn, a former Goldman Sachs executive who leads the president's National Economic Council. Yellen was nominated in October 2013 for the post, which requires Senate confirmation.

Fed Chair Janet Yellen summarized Fed projections by saying GDP is expected to be "a touch stronger" than projected in June while inflation is seen as "softer this year and next". Inflation has remained persistently below that level.

She said the Fed would adjust its policymaking if it thought the causes of low inflation had become permanent.

The Fed will hold a potentially monumental briefing today. Vice Chairman Stanley Fischer, attending his final FOMC meeting this week, has further added to speculation about the Fed's future leadership by unexpectedly announcing his decision to resign in mid-October.

Fed policymakers actually revised up their forecast for economic growth this year to 2.4 percent from a 2.2 percent projection in June. This year, it has lagged below the Fed's 2% target and the forecast now suggests it will continue to do so in 2018.

"We would really urge consumers to be very careful in monitoring their credit reports and financial situation", said Yellen at a press conference following a two-day Federal Open Market Committee meeting. After leaving its benchmark rate at a record low for seven years after the 2008 crisis, the Fed has modestly raised the rate four times since December 2015 to a still-low range of 1 to 1.25 percent.

The Bloomberg Dollar Spot Index rose the most since January after the Fed eased speculation that it would taper its outlook for higher rates because of damage done to the economy by hurricanes.

The confidence was reflected in the Fed's willingness to stick to its current timetable for raising interest rates despite a surprising slowdown in inflation.

It believes its strategy to do so gradually, according to a fixed schedule and slowly increasing the amounts, and signalled very clearly and well in advance to the financial markets, will allow for a smooth process with minimal market volatility. They now expect there will likely be two hikes, down from three.

The balance sheet primarily consists of government and mortgage-backed bonds.

To avoid spooking investors, the process would be so gradual that the Fed's balance sheet would remain above $3 trillion until late 2019. The Fed, though, has yet to achieve its other objective of stabilizing prices at a 2 percent annual rate.

To stimulate the economy, the Fed bought trillions of dollars worth of bonds and mortgage securities.

It also said it will hold benchmark interest rates steady, and signalled a rate hike by the end of 2017. The further the interest rates are from the zero lower bound, the bigger will the room be for balance sheet normalization. Eastern. The Dow Jones industrial average had edged up a mere 0.1 percent.

Markets are now looking to the US Federal Reserve's (Fed) September policy meeting, scheduled for tomorrow and Wednesday.

The Federal Reserve will begin shrinking the enormous portfolio of bonds that it amassed after the 2008 financial crisis to try to sustain a frail economy.